Select Sands Reports Results for the Fourth Quarter and Full Year 2018
(TheNewswire)
April 17, 2019 / TheNewswire / Vancouver, BC, Canada – Select Sands Corp. (“Select Sands” or the “Company”) (TSXV: SNS, OTC: SLSDF) announces operational and financial results for Q4 and full year 2018, and the filing of its financial statements and associated management’s discussion and analysis on www.sedar.com. The Company will host a conference call on Thursday, April 18, 2019 at 10:00 A.M. Central to discuss its Q4 and full year 2018 results (see “Conference Call Information” later in this release for access information).
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Sold 363,610 tons of frac and industrial sand in 2018 – a 20% increase from 303,607 tons sold in 2017;
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Increased revenue by 32% to $20.1 million in 2018 as compared to $15.1 million in the prior year;
Gross profit grew 59% to $4.6 million in 2018 from $2.9 million in 2017, which represented a 3.8% improvement in gross margin;
Reported a net loss of $0.5 million, or $0.01 per basic and diluted share, in 2018 versus a net loss of $1.6 million, or $0.02 per basic and diluted share, in 2017; and
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Generated adjusted EBITDA(1) of $2.5 million in 2018 as compared to an adjusted EBITDA loss of $0.1 million in the prior year.
Fourth Quarter Highlights
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Sold 24,897 tons of frac and industrial sand during Q4 2018 as compared to 81,626 tons in Q3 2018. Contributing to the decrease was an industry-wide reduction in frac sand demand driven by slowdown in well completions in the Permian Basin during Q4 2018 as a result of temporary takeaway capacity constraints, exploration and production budget exhaustion and continued in-basin supply additions;
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Generated revenue of $0.9 million and a gross loss of $0.5 million in Q4 2018, versus $4.0 million of revenue and gross profit of $0.7 million in the preceding quarter;
Reported a Q4 2018 net loss of $2.5 million, or $0.03 per basic and diluted share, as compared to a net loss of $0.1 million, or $0.00 per basic and diluted share, in Q3 2018; and
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As of December 31, 2018, cash and cash equivalents were $4.8 million, inventory on hand was $2.1 million, combined accounts and current income taxes receivable were $0.4 million and working capital was $6.0 million. This is compared to cash and cash equivalents of $5.3 million, inventory on hand of $2.6 million, accounts receivable of $0.8 million and working capital of $6.4 million as of September 30, 2018.
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(1)Adjusted EBITDA is a non-IFRS financial measure and is described and reconciled to net loss in the table under “Non-IFRS Financial Measures”.
Zig Vitols, President and Chief Executive Officer, commented, “We were clearly pleased to report significant year-over-year financial improvement in revenue, gross profit and adjusted EBITDA for the full year 2018, and I want to thank all of our employees for their continued hard work and dedication. As we discussed in our third quarter 2018 results press release and conference call, the significant downturn in the demand for frac sand impacted frac sand producers across the industry. In addition, we were negatively affected by a further move by E&Ps in the southern U.S. oil producing basins to use a much higher percentage of local brown sand being produced in the Texas basins instead of the high quality Northern White sand that we produce.
“Recognizing the critical importance of managing costs and preserving working capital, we responded quickly on a number of fronts, including moving to single shift operations to ensure optimal control of overhead and temporarily suspending activities on our proposed project to expand annual production capacity from 600,000 tons to 1 million tons. On a positive note, we have seen a recent rebound in the demand for Northern White sand but will remain diligent in managing our cost profile as we wait for a continued gradual but steady frac sand market recovery, particularly in the demand for Northern White, that we expect to occur through the remainder of 2019.”
Financial Summary
The following table includes summarized financial results for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017, and for the twelve months ended December 31, 2018 and December 31, 2017:
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For Q1 2019, the Company expects sales volumes of frac and industrial sand of approximately 40,000 tons.
Outlook
Mr. Vitols continued, “Similar to other frac sand producers, we were not immune to the supply and demand imbalance that began in the second half of 2018 as additional in-basin capacity came online and E&P operators began to source more of their frac sand locally. The increase in production capacity reflects the frac sand industry responding to future expectations in drilling and completion activity over the coming years. We expect to see further in-basin supply additions during 2019, which will continue to impact near-term frac sand pricing in the markets we serve. However, given the continued strong underlying fundamentals of the North American oil and gas industry, we view the decrease in demand faced by frac sand producers as transitory in nature. As it relates specifically to our continued deliveries into the Permian Basin, we anticipate increased well completion activity to occur beginning in the second half of this year as additional offtake capacity comes online and E&P operators more aggressively address their significant number of drilled but uncompleted wells.”
“During recent months we have seen signs that the industry is beginning to more fully recognize the benefits of using Northern White versus in-basin frac sand”, concluded Mr. Vitols. “While clearly there is a transportation cost advantage for E&P operators to source frac sand as close to their wellsite as possible, the reduced performance characteristics – primarily crush strength and conductivity – of certain local and regional brown sand deposits appear to be negatively impacting the production performance of wells. This has resulted in some of our customers re-dedicating their purchases back to Northern White. As such, we believe that there is a continued long-term need for Northern White as E&P operators focus on optimizing the economic ultimate recovery of their well inventory. Given the high quality of our Northern White sand product offering that is strategically located much closer to key oil and gas basins in the U.S. as compared to traditional sources in the Upper Midwest, we believe we are solidly positioned for long-term success as market conditions for high quality Northern White sand continue to improve.”
Elliott A. Mallard, PG of Kleinfelder is the qualified person as per the NI-43-101 and has reviewed and approved the technical contents of this news release.
The Company will host a conference call on Thursday, April 18, 2019 at 10:00 a.m. Central (CDT) to discuss Q4 and full year 2018 results. To access the conference call, callers in North America may dial toll free 1-855-669-9657 and callers outside North America may dial 1-412-542-4135. Please call ten minutes ahead of the scheduled start time to ensure a proper connection and ask to be joined into the Select Sands call.
A playback of the conference call will be available in MP3 format by contacting investor relations below.
Select Sands Corporation is an industrial silica product company, which owns a number of properties in Arkansas and is currently in production at its 100% owned, Tier-1 (Northern White), silica sands property located near Sandtown, Arkansas, U.S.A. Select Sands’ goal is to become a key supplier of premium industrial silica sand and frac sand to North American markets. Select Sands’ Arkansas properties have a significant logistical advantage of being significantly closer to oil and gas markets located in Oklahoma, Texas and Louisiana than sources of similar sands from the Wisconsin area. The Tier-1 reference above is a classification of frac sand developed by PropTester, Inc., an independent laboratory specializing in the research and testing of products utilized in hydraulic fracturing & cement operations, following ISO 13503-2:2006/API RP19C:2008 standards.
Select Sands’ Sandtown project has NI 43-101 compliant Indicated Mineral Resources of 42.0MM tons (TetraTech Report; February, 2016) and Bell Farm has Inferred Mineral Resources of 49.6MM tons (Kleinfelder Report; April, 2017). Both deposits are considered Northern White finer-grade sand deposits of 40-70 Mesh and 100 Mesh.
This news release includes forward-looking information and statements, which may include, but are not limited to, information and statements regarding or inferring the future business, operations, financial performance, prospects, and other plans, intentions, expectations, estimates, and beliefs of the Company. Information and statements which are not purely historical fact are forward-looking statements. The forward-looking statements in this press release relate to comments that include, but are not limited to improved customer demand for frac sand, longer-term utility of in-basin and Northern White sands and strategic location as compared to traditional Northern White sand producers in the Upper Midwest. Forward-looking information and statements involve and are subject to assumptions and known and unknown risks, uncertainties, and other factors which may cause actual events, results, performance, or achievements of the Company to be materially different from future events, results, performance, and achievements expressed or implied by forward-looking information and statements herein. Although the Company believes that any forward-looking information and statements herein are reasonable, in light of the use of assumptions and the significant risks and uncertainties inherent in such information and statements, there can be no assurance that any such forward-looking information and statements will prove to be accurate, and accordingly readers are advised to rely on their own evaluation of such risks and uncertainties and should not place undue reliance upon such forward-looking information and statements. Any forward-looking information and statements herein are made as of the date hereof, and except as required by applicable laws, the Company assumes no obligation and disclaims any intention to update or revise any forward-looking information and statements herein or to update the reasons that actual events or results could or do differ from those projected in any forward-looking information and statements herein, whether as a result of new information, future events or results, or otherwise, except as required by applicable laws.
Company Contact
Please visit www.selectsandscorp.com or call:
Zigurds Vitols
President & CEO
Phone: (844) 806-7313
Investor Relations Contact
Arlen Hansen
Phone: (604) 684-6730
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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Non-IFRS Financial Measures
The following information is included for convenience only. Generally, a non-IFRS financial measure is a numerical measure of a company’s performance, cash flows or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. Adjusted EBITDA is not a measure of financial performance (nor does it have a standardized meanings) under IFRS. In evaluating non-IFRS financial measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts.
The Company uses both IFRS and certain non-IFRS measures to assess operational performance and as a component of employee remuneration. Management believes certain non-IFRS measures provide useful supplemental information to investors in order that they may evaluate Select Sands' financial performance using the same measures as management. Management believes that, as a result, the investor is afforded greater transparency in assessing the financial performance of the Company. These non-IFRS financial measures should not be considered as a substitute for, nor superior to, measures of financial performance prepared in accordance with IFRS.
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The Company defines Adjusted EBITDA as net (loss) income before depreciation and amortization, non-cash share-based compensation, finance costs, income taxes, share of loss of equity investee and provision for impairment in the Company’s investment in associate. Select Sands uses Adjusted EBITDA as a supplemental financial measure of its operational performance. Management believes Adjusted EBITDA to be an important measure as they exclude the effects of items that primarily reflect the impact of long-term investment and financing decisions, rather than the performance of the Company’s day-to-day operations. As compared to net income according to IFRS, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's business, the charges associated with impairments, termination costs or Proposed Transaction costs. Management evaluates such items through other financial measures such as capital expenditures and cash flow provided by operating activities. The Company believes that these measurements are useful to measure a company’s ability to service debt and to meet other payment obligations or as a valuation measurement.
Indicated Resources Disclosure
The Company advises that the production decision on the Sandtown deposit (the Company’s current “Sand Operations”) was not based on a Feasibility Study of mineral reserves, demonstrating economic and technical viability, and, as a result, there may be an increased uncertainty of achieving any level of recovery of minerals or the cost of such recovery, including increased risks associated with developing a commercially mineable deposit. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee that production will occur as anticipated or that anticipated production costs will be achieved.
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